Although there is a difference in the type of information presented in financial and management
accounts, the underlying objective is the same - to satisfy the information needs of the user.
These needs can be described in terms of the following overall information objectives:
Collection in money terms of information relating to transactions that
have resulted from business operations
Recording and Recording and classifying data into a permanent and logical form. This
Classifying is usually referred to as "Book-keeping"
Summarising data to produce statements and reports that will be useful
Summarising to the various users of accounting information - both external and
Interpreting and Interpreting and communicating the performance of the business to the
Communicating management and its owners
Forecasting and Forecasting and planning for future operation of the business by
providing management with evaluations of the viability of proposed
Planning operations. The key forecasting and planning tool is the "Budget"
The process by which accounting information is collected, reported, interpreted and actioned is
called "Financial Management". Taking a commercial business as the most common
organisational structure, the key objectives of financial management would be to:
(1) Create wealth for the business
(2) Generate cash, and
(3) Provide an adequate return on investment bearing in mind the risks that the business is taking
and the resources invested
In preparing accounting information, care should be taken to ensure that the information presents
an accurate and true view of the business performance and position. To impose some order on
what is a subjective task, accounting has adopted certain conventions a